Retail Commercial Property Lease Renewal Advice
Discussion
Question for commercial landlords, I guess, but would appreciate input from commercial agents as well.
How do you handle your lease renewals?
Do you engage and negotiate with the tenant yourself or do you hire an agent to do this on your behalf?
If you do this yourself, how do you ascertain whether the rent should stay the same or rise?
Due to my fathers passing, I've inherited a retail commercial property.
The existing tenants lease expires in a few months so need to progress this.
Plan was to start this process in the spring but then Covid happened so decided to wait to see how the economy fares.
My father had a long standing relationship with a local agent who has been very helpful (he advised waiting till June/July) but wants his standard fee even if the existing tenant decides to renew at the current rent whereas I'm of the view of a a fixed reduced fee in this scenario.
My father, I believe, used to handle the lease renewals himself but would use an agent to find a new tenant when the property became vacant but he had decades of experience of this.
If he's able to obtain a rent increase, then I'd be happy to go with his standard fee - from a meeting in the spring, he seemed comfortable that a rent increase (10% appx) could be achievable due to him recently letting a neighbouring, smaller property for more than my tenant is paying but things have changed somewhat since then!
Any advice/guidance gratefully appreciated.
How do you handle your lease renewals?
Do you engage and negotiate with the tenant yourself or do you hire an agent to do this on your behalf?
If you do this yourself, how do you ascertain whether the rent should stay the same or rise?
Due to my fathers passing, I've inherited a retail commercial property.
The existing tenants lease expires in a few months so need to progress this.
Plan was to start this process in the spring but then Covid happened so decided to wait to see how the economy fares.
My father had a long standing relationship with a local agent who has been very helpful (he advised waiting till June/July) but wants his standard fee even if the existing tenant decides to renew at the current rent whereas I'm of the view of a a fixed reduced fee in this scenario.
My father, I believe, used to handle the lease renewals himself but would use an agent to find a new tenant when the property became vacant but he had decades of experience of this.
If he's able to obtain a rent increase, then I'd be happy to go with his standard fee - from a meeting in the spring, he seemed comfortable that a rent increase (10% appx) could be achievable due to him recently letting a neighbouring, smaller property for more than my tenant is paying but things have changed somewhat since then!
Any advice/guidance gratefully appreciated.
Without wishing to sound harsh, from what you have written it is clear that you have quite a lot to learn. If you have a non-savvy tenant you might be able to muddle through with your limited expertise however a knowledgeable tenant could pull your trousers down. I suggest you speak to an agent.
As surveyor says keeping a rent static would be good let alone increase it. A lot has changed since March.
Do remember that the rent loss during a void quickly offsets any increase, and empty rates are likely to be payable on any retail unit that is empty longer than 3 months.
In my opinion its far better to have a reliable known tenant paying less than what an agent suggests is the market rent, rather than a new tenant who may not pay at all!
Do remember that the rent loss during a void quickly offsets any increase, and empty rates are likely to be payable on any retail unit that is empty longer than 3 months.
In my opinion its far better to have a reliable known tenant paying less than what an agent suggests is the market rent, rather than a new tenant who may not pay at all!
Appreciate the replies and the candor - not offended at all.
Yes, I have limited experience in commercial letting but do have some experience in residential lettings as well as negotiations.
However, I am the first to admit some apprehension with this scenario due to the 'balance of power' shifting towards the tenant due to Covid.
Pre-Covid, when I met with the local agent, I readily expressed my view that I would be happy with a renewal at the current rent/terms which ties in with comments made here - it's definitely a different economic/commercial landscape to the beginning of the year and I agree that a straightforward renewal, with a known tenant would be better than an empty shop.
The 'issue' I have is the agents fee if, when he speaks to the tenant, its a straightforward renewal at the existing rent/terms, with respect to the agent, and similar professionals, do those of you with experience/knowledge believe this would still warrant a standard fee as opposed to a reduced fixed fee?
Yes, I have limited experience in commercial letting but do have some experience in residential lettings as well as negotiations.
However, I am the first to admit some apprehension with this scenario due to the 'balance of power' shifting towards the tenant due to Covid.
Pre-Covid, when I met with the local agent, I readily expressed my view that I would be happy with a renewal at the current rent/terms which ties in with comments made here - it's definitely a different economic/commercial landscape to the beginning of the year and I agree that a straightforward renewal, with a known tenant would be better than an empty shop.
The 'issue' I have is the agents fee if, when he speaks to the tenant, its a straightforward renewal at the existing rent/terms, with respect to the agent, and similar professionals, do those of you with experience/knowledge believe this would still warrant a standard fee as opposed to a reduced fixed fee?
SpeedBash said:
Appreciate the replies and the candor - not offended at all.
Yes, I have limited experience in commercial letting but do have some experience in residential lettings as well as negotiations.
However, I am the first to admit some apprehension with this scenario due to the 'balance of power' shifting towards the tenant due to Covid.
Pre-Covid, when I met with the local agent, I readily expressed my view that I would be happy with a renewal at the current rent/terms which ties in with comments made here - it's definitely a different economic/commercial landscape to the beginning of the year and I agree that a straightforward renewal, with a known tenant would be better than an empty shop.
The 'issue' I have is the agents fee if, when he speaks to the tenant, its a straightforward renewal at the existing rent/terms, with respect to the agent, and similar professionals, do those of you with experience/knowledge believe this would still warrant a standard fee as opposed to a reduced fixed fee?
Don’t let the tail wag the dog, as they say. Yes, I have limited experience in commercial letting but do have some experience in residential lettings as well as negotiations.
However, I am the first to admit some apprehension with this scenario due to the 'balance of power' shifting towards the tenant due to Covid.
Pre-Covid, when I met with the local agent, I readily expressed my view that I would be happy with a renewal at the current rent/terms which ties in with comments made here - it's definitely a different economic/commercial landscape to the beginning of the year and I agree that a straightforward renewal, with a known tenant would be better than an empty shop.
The 'issue' I have is the agents fee if, when he speaks to the tenant, its a straightforward renewal at the existing rent/terms, with respect to the agent, and similar professionals, do those of you with experience/knowledge believe this would still warrant a standard fee as opposed to a reduced fixed fee?
What’s more important? Secure tenant or micro managing a fee?
Remember the fee is tax deductible.
I am both a tenant and landlord in this market. Do not be persuaded that a good agent will make any better job of it than you can yourself. I would start by going and having an informal chat with your tenant. In the current climate all the legislation is pretty well irrelevant as all bets are off. The agents will tell you they will avoid Heffalump traps and negotiate a better deal, they may but in my experience they have nothing to loose and are highly skilled at creating ill feeling between landlord and tenant, requiring their services at great cost to resolve.
Speaking as a commercial surveyor I would hate to see a fellow professional lose out on a fee, however the priority in this market is keeping your tenant onside and ensuring that bums remain on seats rather than trying to get an uplift in rent based upon evidence from a market that is nothing like the current one.
I would be approaching the tenant in person to ask how they are doing and see what they want to do at the moment. I wouldn't pressurise them into anything and under lease renewal legislation there is no need to get everything sorted straight away - the lease can 'hold over' until you agree a renewal.
Have a friendly chat and if he is wanting to commit to a new lease offer to agree to a new one on the same terms as the current one. You can then instruct your solicitor to prepare it all.
I would be approaching the tenant in person to ask how they are doing and see what they want to do at the moment. I wouldn't pressurise them into anything and under lease renewal legislation there is no need to get everything sorted straight away - the lease can 'hold over' until you agree a renewal.
Have a friendly chat and if he is wanting to commit to a new lease offer to agree to a new one on the same terms as the current one. You can then instruct your solicitor to prepare it all.
soxboy said:
Speaking as a commercial surveyor I would hate to see a fellow professional lose out on a fee, however the priority in this market is keeping your tenant onside and ensuring that bums remain on seats rather than trying to get an uplift in rent based upon evidence from a market that is nothing like the current one.
I would be approaching the tenant in person to ask how they are doing and see what they want to do at the moment. I wouldn't pressurise them into anything and under lease renewal legislation there is no need to get everything sorted straight away - the lease can 'hold over' until you agree a renewal.
Have a friendly chat and if he is wanting to commit to a new lease offer to agree to a new one on the same terms as the current one. You can then instruct your solicitor to prepare it all.
Is this true even if the lease is outside the LTA1954?I would be approaching the tenant in person to ask how they are doing and see what they want to do at the moment. I wouldn't pressurise them into anything and under lease renewal legislation there is no need to get everything sorted straight away - the lease can 'hold over' until you agree a renewal.
Have a friendly chat and if he is wanting to commit to a new lease offer to agree to a new one on the same terms as the current one. You can then instruct your solicitor to prepare it all.
I was led to believe it is harder to remove the tenant if they hold over and the lease is outside the LTA1954.
SpeedBash said:
soxboy said:
Speaking as a commercial surveyor I would hate to see a fellow professional lose out on a fee, however the priority in this market is keeping your tenant onside and ensuring that bums remain on seats rather than trying to get an uplift in rent based upon evidence from a market that is nothing like the current one.
I would be approaching the tenant in person to ask how they are doing and see what they want to do at the moment. I wouldn't pressurise them into anything and under lease renewal legislation there is no need to get everything sorted straight away - the lease can 'hold over' until you agree a renewal.
Have a friendly chat and if he is wanting to commit to a new lease offer to agree to a new one on the same terms as the current one. You can then instruct your solicitor to prepare it all.
Is this true even if the lease is outside the LTA1954?I would be approaching the tenant in person to ask how they are doing and see what they want to do at the moment. I wouldn't pressurise them into anything and under lease renewal legislation there is no need to get everything sorted straight away - the lease can 'hold over' until you agree a renewal.
Have a friendly chat and if he is wanting to commit to a new lease offer to agree to a new one on the same terms as the current one. You can then instruct your solicitor to prepare it all.
I was led to believe it is harder to remove the tenant if they hold over and the lease is outside the LTA1954.
If you accept rent after the expiry date of a lease that is outside the L&T Act then you are creating a tenancy and it does indeed make it harder to remove a tenant, but then you've got to ask yourself whether you actually need a tenant removing for any reason other than how you could get them out if a lease was within the Act.
singlecoil said:
Raising retail rents in a market where landlords consider themselves doing well to get any rent paid at all? Good luck with that.
You’d be surprised!Our local authority is doing exactly that. Their policy seems to be less premises filled, raise the rents for those still there.
I lease through the agency that deals with all the LA tenancies, and the guy who looks after ours said the LA would rather have a property empty than negotiate the increase on rents.
We played hard ball, threatened (nicely) that we would have to leave. Literally a few days before the renewal they agreed to a sliding scale increase over the term, but an increase it was.
You can’t even use the rent neighbouring properties pay to get a better deal, as they own them all, so when rent increases for you it increases everywhere in the area.
I am genuinely sympathetic to tenants in the current climate and am viewing this with that in mind.
As much as I want to use the local agent, even though he himself has now offered a competitive fee to handle the negotiations at the current rent, I have decided to speak to the landlord myself - I need to build a relationship with him at some point, so why not start now?
From the outset, I've been happy with a renewal at current terms but do think that some rent uplift should take place to bring it in line with the pre-Covid/current rents in the area - during the previous 5yrs, the tenant would have enjoyed rent below what neighbouring incoming tenants were paying.
Again, I'm conscious of what is currently happening regarding Covid and would be happy to take a staggered uplift but do feel, at the very least, I need to broach the subject and see what the tenant thinks - worst case, he says no.
The proposed uplift is £2k a year so about £40 a day over the 5yrs which I am sure his business can absorb.
This could all be moot anyway as he may have already decided to vacate!
As much as I want to use the local agent, even though he himself has now offered a competitive fee to handle the negotiations at the current rent, I have decided to speak to the landlord myself - I need to build a relationship with him at some point, so why not start now?
From the outset, I've been happy with a renewal at current terms but do think that some rent uplift should take place to bring it in line with the pre-Covid/current rents in the area - during the previous 5yrs, the tenant would have enjoyed rent below what neighbouring incoming tenants were paying.
Again, I'm conscious of what is currently happening regarding Covid and would be happy to take a staggered uplift but do feel, at the very least, I need to broach the subject and see what the tenant thinks - worst case, he says no.
The proposed uplift is £2k a year so about £40 a day over the 5yrs which I am sure his business can absorb.
This could all be moot anyway as he may have already decided to vacate!
The rent needs to be set at what it should be now, not what it should have been pre Covid. Whilst he may have had a ‘good deal’ up until now, we are in a different position currently.
I personally wouldn’t be pushing for any uplift now, I would concentrate on getting him signed up for a new lease over any increase.
You haven’t said how long the current lease is but how about a new 5 year one at the passing rent but with a review after 3 years?
I personally wouldn’t be pushing for any uplift now, I would concentrate on getting him signed up for a new lease over any increase.
You haven’t said how long the current lease is but how about a new 5 year one at the passing rent but with a review after 3 years?
Again, thank you for the replies - genuinely appreciate your views/experience.
Looking for a straight renewal for 5yrs.
Yes, I would be OK to renew at the current rent and agree that renewing with the current tenant should be a priority.
Can I ask, should I not even broach the subject of an uplift?
Ideally, the uplift would be:
Current rent + £2k per year for 5yrs
However, would be happy with a staggered approach, for example:
Current rent + £1k = for year 1
Current rent + £2k for years 2-5
or even
Current rent for year 1
Current rent + £1k = for year 2
Current rent + £2k for years 3-5
Looking for a straight renewal for 5yrs.
Yes, I would be OK to renew at the current rent and agree that renewing with the current tenant should be a priority.
Can I ask, should I not even broach the subject of an uplift?
Ideally, the uplift would be:
Current rent + £2k per year for 5yrs
However, would be happy with a staggered approach, for example:
Current rent + £1k = for year 1
Current rent + £2k for years 2-5
or even
Current rent for year 1
Current rent + £1k = for year 2
Current rent + £2k for years 3-5
I’m not sure if this post is genuine or not?
In the middle of a global pandemic you’re wanting to touch upon the subject of putting up the rent?
What is the business of the chap renting your property?
How much rent do you receive?
If it were me id try and create goodwill by offering a 10% discount and would pray to god he accepts!!
If he doesn’t, what will you do?
In the middle of a global pandemic you’re wanting to touch upon the subject of putting up the rent?
What is the business of the chap renting your property?
How much rent do you receive?
If it were me id try and create goodwill by offering a 10% discount and would pray to god he accepts!!
If he doesn’t, what will you do?
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